The Role of Marketing Orders in Establishing and Maintaining Orderly Marketing Conditions

GAO reviewed 9 marketing orders covering 11 agricultural commodities to: (1) address controversies surrounding the marketing order program and the effect of each individual type of marketing order tool on commodity supplies; (2) determine emerging trends in the use of marketing orders; and (3) assess the Agricultural Marketing Service's (AMS) administration of the marketing order program. Under the program, AMS helps commodity producers collectively work out solutions to supply and demand problems that individual producers are unable to resolve.

Critics of marketing orders contend that: (1) economic efficiency is enhanced when commodity prices and availability are determined in competitive markets; and (2) marketing orders undermine efficiency by artificially and excessively raising commodity prices higher than a free market would allow. Proponents of marketing orders argue that they reduce supply imbalances for perishable commodities in markets that are volatile if unregulated. GAO found that: (1) the marketing orders for hops and spearmint oil restrict new growers from entering the marketplace, and the marketing order for lemons typically results in waste; (2) while most marketing orders regulate the entry of products into the market, both producers and consumers benefit from the restrictions; (3) controls governing the quality of commodities encourage producers to improve products and assure consumers that their products meet minimum quality standards; (4) for 10 of the 11 commodities studied, competitive forces are sufficient to limit price increases; and (5) the current trend in marketing order operations is a shift from controlling supply to enhancing demand using a mixture of research, development, and advertising tools. In addition, GAO found that: (1) AMS plays a limited role in industry education; (2) the program operations manual for marketing orders has not been updated since 1966 and does not address the shift to marketing orders designed to enhance demand; and (3) AMS has no criteria to measure marketing system performance.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Brian P. Crowley Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 512-9450